Mendocino Brewing Co., which grew in 33 years from a funky, local craft brewery in Hopland to an international player in the beer market is facing dire financial straits.
A pioneer in the craft brewing movement, the brewery could fold if it doesn’t receive a promised $1 million loan from its chairman of the board and indirect majority stakeholder, industrialist Vijay Mallya, according to its latest Securities and Exchange Commission filing.
But Mallya, a global entrepreneur who was hailed as the brewing company’s savior when he invested money in the company in exchange for majority shares in 1997, is embroiled in his own financial and legal problems in India and may not be able to come through with the money promised by his holding company, United Breweries, according to news reports. The problems include that Kingfisher Airline, a group company of United Breweries, is in debt to several banks in India, according to the Times of India. The Bank of India has dubbed Mallya a “willful defaulter,” according to news reports.
If United Breweries is unable to make good on the financing promised to Mendocino Brewing Co., “It would have a material adverse effect on the company’s financial condition and the company’s ability to continue to operate,” company officials stated in the SEC report for the quarter ending March 31. The brewing company also is named in several lawsuits involving its subsidiaries and affiliates, according to the SEC filing.
Its chief financial officer, Mahadevan Narayanan, did not respond to multiple requests for comment as of Thursday. Company co-founder and board member Michael Laybourn said he’s aware of the financial concerns, but isn’t involved in running the company.
“I know they’re working on a loan,” he said.
Laybourn and Norman Franks founded what was initially called the Hopland Brewery in 1983, utilizing equipment and the brewers from the New Albion Brewing Co. in Sonoma, which had recently been shuttered. They gave their beers bird themed names: Red Tail Ale, Eye of the Hawk, Black Hawk and Blue Heron.
Theirs was the first post-Prohibition California brewpub, licensed to sell both its beer and food, and the second in the nation. As popularity for its beer grew, the company expanded, building a new brewery in Ukiah in the 1990s.
The brewery has been relatively constant in the number of barrels it has produced on an annual basis. During a period of extraordinary growth for craft beer nationally, Mendocino Brewing hovered around the 40,000-barrel level from 2005 to 2014, according to state tax records.
The company also brews beer at its Saratoga Springs, New York facility. Its overall production is 75,000 barrels, according to the company’s website.
The company took a big downturn last year. In 2015, Mendocino Brewing Co. experienced an almost 20 percent drop in overall shipments at 32,715 barrels, according to state tax records. Today, its stock is trading for just 25 cents a share, down from a recent peak of 85 cents a share in June 2014. Its initial public stock offering in 1995, aimed at boosting its flagging finances of that time, was $6 a share.
Zach Shelton, beer buyer at Bottle Barn, said Mendocino has struggled to stay relevant with a younger craft beer consumer base that cares more about trendy beer styles than a brewery’s history.